Oil slumps on eurozone strains, Mideast

OIL prices have slumped on fresh economic strains in Europe and amid expectations – still unfulfilled late in the day – of a ceasefire between Israel and Gaza.

New York’s main contract, WTI light sweet crude for delivery in January, on Tuesday slid $US2.53 from Monday to $US86.75 a barrel.

Brent North Sea crude for January shed $US1.87 to $109.83 a barrel in London trade.

“Rumours abound today as headlines out of the Middle East signalled an ‘imminent ceasefire’ agreement, but as of this writing nothing has been set in stone,” said BMO Capital Markets in its market summary.

“The rumour alone pushed the market lower erasing much of the gains from the previous day sessions, and given all the headline watching, expect continued swings as the Middle East risk premium has re-emerged as the Alpha dog on the street.”

Oil prices had surged about $US2 a barrel to strike one-month highs on Monday as Israel stepped up its assault on Gaza.

The pressure lower also came with Moody’s downgrade of France’s sovereign rating late Monday, warning that it was vulnerable to more deterioration in the eurozone.

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